Correlation Between MRF and Bigbloc Construction

Can any of the company-specific risk be diversified away by investing in both MRF and Bigbloc Construction at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining MRF and Bigbloc Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between MRF Limited and Bigbloc Construction Limited, you can compare the effects of market volatilities on MRF and Bigbloc Construction and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in MRF with a short position of Bigbloc Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of MRF and Bigbloc Construction.

Diversification Opportunities for MRF and Bigbloc Construction

-0.18

Correlation Coefficient

MRF  Bigbloc Construction

Good diversification

The 3 months correlation between MRF and Bigbloc is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding MRF Limited and Bigbloc Construction Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bigbloc Construction and MRF is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on MRF Limited are associated (or correlated) with Bigbloc Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bigbloc Construction has no effect on the direction of MRF i.e., MRF and Bigbloc Construction go up and down completely randomly.

Pair Corralation between MRF and Bigbloc Construction

Assuming the 90 days trading horizon MRF Limited is expected to under-perform the Bigbloc Construction. But the stock apears to be less risky and, when comparing its historical volatility, MRF Limited is 7.14 times less risky than Bigbloc Construction. The stock trades about -0.02 of its potential returns per unit of risk. The Bigbloc Construction Limited is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  11,061  in Bigbloc Construction Limited on October 8, 2024 and sell it today you would lose (1,172) from holding Bigbloc Construction Limited or give up 10.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.46%
Values	Daily Returns

MRF Limited  vs.  Bigbloc Construction Limited

MRF Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MRF Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Bigbloc Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bigbloc Construction Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's essential indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with MRF and Bigbloc Construction

The main advantage of trading using opposite MRF and Bigbloc Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MRF position performs unexpectedly, Bigbloc Construction can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Bigbloc Construction will offset losses from the drop in Bigbloc Construction's long position.

The idea behind MRF Limited and Bigbloc Construction Limited pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.